On Monday, ISDA launched the ISDA Benchmarks Supplement Protocol. Clients should expect outreach from regulated counterparties in the near future concerning adherence to this protocol. We encourage our clients to review the protocol and to consider their preferred approach to addressing its subject matter.
As you may have seen, ISDA recently published the ISDA 2018 Credit Support Annex for Initial Margin (IM) (Security Interest – New York Law) and the ISDA 2018 Credit Support Deed for Initial Margin (IM) (Security Interest – English Law).
These new 2018 CSA/CSD forms are intended for use by buy and sell-side firms that will be in scope for mandatory initial margin requirements for non-centrally cleared derivatives beginning in September 2019 (Phase 4) or September 2020 (Phase 5).
Planning for Phase 5 Initial Margin Requirements for Uncleared Swaps
Monday, June 3rd, 2019 is the first day in the June, July, August calculation period for determining the average daily aggregate notional amount (AANA) under U.S. uncleared margin rules to assess whether a market participant is in-scope for the Phase 5, September 1, 2020 initial margin compliance date. We encourage clients to begin to calculate their AANA numbers to determine whether any of their trading vehicles exceed the USD 8 billion material swaps exposure threshold across all of their relevant uncleared swaps, security-based swaps, foreign exchange forwards and foreign exchange swaps. We also encourage clients who have not already done so to engage now in dialogue with their regulated counterparties about this process and to review the ISDA published initial margin documentation.
An amendment to FINRA Rule 4210, expanding the Rule’s margin requirements, will become effective on June 25, 2018. As a result, broker-dealers will now have to collect variation and initial margin with respect to certain transactions, including “To Be Announced” (“TBA”) transactions, with certain counterparties.
Relevant to Article 15 of the EU Securities Financing Transactions Regulation (“SFTR”) Article 15 of the SFTR has been interpreted to require all counterparties, including buy side counterparties outside Europe, to inform their European counterparties of the risks involved in collateral arrangements that permit the reuse of posted securities.
Relevant to Article 15 of the EU Securities Financing Transactions Regulation (“SFTR”) Article 15 of the SFTR has been interpreted to require all counterparties, including buy side counterparties outside Europe, to inform their European counterparties of the risks involved in collateral arrangements that permit the reuse of posted securities. As a result, firms that receive… Continue reading Certain Risk Disclosures Required to be Provided to European Counterparties by Today
Swap Dealers Set to Issue IM Segregation Right Notices In Advance of First CFTC Compliance Deadline
– ISDA Amend Offers Buy Side Centralized Platform for Making Required Elections
– Prompt Responses Will Help to Avoid Potential Trading Disruptions
“Top Up Agreement” Leverages ISDA’s March 2013 Dodd-Frank Protocol
The European Market Infrastructure Regulation (“EMIR”) is the European Union measure that implements the G-20 recommendations for derivatives. It applies generally to the activities of European entities that trade in derivatives, including their trading activities with non-European counterparties.
Earlier this year, ISDA finalized and published the ISDA March 2013 DF Protocol
In light of the many questions that we have been receiving from clients regarding the operation of CFTC Rule 1.73, we have prepared the attached diagrams to illustrate how the rule applies to give up transactions as well as bunched orders.
Although the deadline to adhere to ISDA’s “Dodd-Frank Protocol I” has effectively been extended to May 1, 2013, T-H recommends that firms planning to adhere submit their protocol adherence letter and exchange questionnaires with dealer counterparties no later than March 31, 2013 to avoid processing delays that could occur as the deadline approaches.
Phased deadlines for mandatory clearing requirements have now been set. Market participants should work with their FCMs to ensure that they have OTC clearing documentation in place in advance of the compliance deadlines.
Many Seinfeld fans will recall the angst felt by George Costanza when two of his worlds began to collide (in George’s case, his “relationship world” and his “friends world”). Some newcomers to swap clearing may be similarly concerned when they realize that their cleared swaps will not be governed by the familiar, tried and true ISDA master agreement that governs their uncleared swaps; instead they must become comfortable with new industry documentation that has emerged from the collision of the swaps and futures clearing worlds in the United States.2 This article is intended to explain the basis for this new documentation and provide an overview of its architecture and contents.
Earlier this week ISDA published the ISDA August 2012 DF Protocol (the “DF Protocol”), which is now open for adherence.
In response to Eurozone concerns, ISDA recently published its Illegality/Force Majeure Protocol, which is now open for adherence. What It Does: This Protocol enables parties to 1992 ISDA Master Agreements to incorporate the illegality and force majeure provisions of the 2002 ISDA Master Agreement. Why: This Protocol is intended to provide parties transacting under 1992… Continue reading Eurozone Contingency Planning: ISDA’s Illegality/Force Majeure Protocol – Teigland-Hunt LLP Client Alert
Although the timeline for mandatory clearing of swaps under the Dodd-Frank Act narrows, bilaterally negotiated OTC derivatives remain, and will continue to remain, relevant. The parties to non-cleared OTC transactions will need to negotiate an ISDA Master Agreement to govern the general non-trade specific terms of such transactions: Default, Termination, Netting and also more mundane matters such as notice and governing law provision must be addressed. This article reviews which of the ISDA Master Agreements may be most appropriate, the main differences between them and provides an analysis of the central provisions that arise in the negotiation thereof.
While the prospect of mandatory clearing is looming market participants continue to enter into over-the-counter derivative trades bilaterally under an ISDA Master Agreement. This Part I of the article discusses the origins of the ISDA Master Agreements, the architecture of the standardized documentation (including that it forms a single agreement), and the risk and compliance considerations that should be taken into account prior to entering into an ISDA Master Agreement and also during the course of a trading relationship documented under such agreement.
Even in these early days, the collapse of MF Global is proving significant for a number of reasons. In addition to being one of the ten largest bankruptcies in U.S. history, MF Global’s collapse potentially involves missing customer assets amounting to hundreds of millions of dollars. In the long run, however, one of the larger distinctions may prove to be that the liquidation of MF Global will require the unprecedented application of two vastly different bankruptcy and customer asset protection regimes to a sizeable brokerage firm.
In anticipation of growing demand for swap clearing with the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Futures Industry Association (FIA) and the International Swaps and Derivatives Association, Inc. (ISDA) today published their first standardized form of agreement covering cleared swaps. The “Cleared Derivatives Execution Agreement” will allow parties entering into swaps that are intended to be cleared to address certain issues that may arise in connection with the execution of such transactions. In the near future FIA also will be publishing a standardized form of addendum for futures clearing agreements between customers and their futures commission merchants (FCMs) that addresses terms related to the clearing of swaps.